Res 1993-185 - Laserfiche WebLink

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/bAD HII and its affiliates. The settlement also provides that illI and its affiliates, including the Debtor, will retain their respective net operating loss carryovers, capital loss carryovers and business credit carryovers (collectively the "Tax Attributes") for all taxable years or periods that end on or before the Effective Date. However, these Tax Attributes will be relinquished and waived immediately after the Effective Date. HII and its affiliates may also incur ~ reduction in their adjusted basis of property. In addi tion, HII and its afLliates will relinquish and waive their respective rights to any tax refund claims that they may have with respect to tax returns for taxable years or periods that end on or before the Effective Date. C. Tax Consequences to Creditors The tax consequences of the implementation of the Plan to a Creditor will depend on, among other things, (i) the Creditor's accounting method, and (ii) the Creditor's taxpayer status for federal income tax purposes. The tax consequences on -:he receipt of cash allocable to interest are discussed below in "Receipt of Interest." 1. Creditors Receivinq Cash A Crèditor that receives,cash in satisfaction of its Claim gener~lly will recognize gain or loss on the exchange equal to the difference between the Creditor's tax basis in the Claim and the amo~~t of any cash received that is not allocable to interest. The character of any gain or loss generally will depend upon the status of the holder of the Claim, the nature, of the Claim in such holder's hands and the holding period of sufh Claim. Creditors should consult their own tax advisors regarding the amount and character of gain or loss, if any, to be recognized by them under the Plan. 2. Receipt of Interest A portion of the consideration received pursuant to the Plan in payment of a Claim may be allocated to unpaid interest and/or accrued original issue discount, and the remainder of the consideration will be allocated to the principal amount of the Claim; howe'Jer, the manne r in which such allocation must be done for federal income tax purposes is not clear. The tax consequences of the consideration allocable to the portion of a Claim related to interest and accrued original is'sue discount differ from the tax consequences of the consideration allocable to the portion of a Claim related to principal. A Creditor which, under its accounting method, has not included in income accrued but unpaid interest attributable to its existing Claim, and which exchanges its interest Claim for cash pursuant to the Plan will be treated as receiving ordinary interest income to the extent that consideration is allocable to such interest, regardless of whether (i) the Claim holder realizes an overall gain or loss as a resul t of the exchange on its existing Claim and (ii) the Claim holder's existing Claim is a capital asset in its - 29 - a-2015S